2022 Boise Idaho Real Estate Blog

The Real Story Behind The Appraisal

Main Boise Home Loans

So, what the heck goes into determining the value on a home appraisal? Maybe you're thinking to yourself, "Why didn't those new cabinets I installed add any value to my home?" Well, look no further...your answers are waiting here!

Dear Visitor:

When purchasing or refinancing a home, the appraisal is one of the more confusing pieces of the loan transaction puzzle. I have literally had hundreds of clients and prospects who come to me thinking their house is worth a higher amount than the appraisal indicates, so this appraised value rarely makes sense to them!

First of all, it is important to understand that your appraiser is completely independent from lenders, Real Estate Agents, sellers, etc. All appraisers must act in accordance with guidelines that are set by the Uniform Standards of Professional Appraisal Practice (USPAP). These guidelines help appraisers put a fair market value on homes, and they are based on comparable sales in the same area.

Let's talk about some common examples homeowners ask me about. There is no specified dollar amount attached to a home with a pool, spa, bathroom upgrades, or a home with a great view. A homeowner very easily could install a custom pool that cost them $40,000, but if the local market only supports a value of $20,000, then that item will be valued at $20,000 on the appraisal. With older homes, costs of remodeling are rarely reflected in the appraisal. This is usually due to the fact that around 1/4 to 1/3 of the projects remodeling costs are associated with demolition and fixing of the surprise issues (plumbing replacement or updating wiring). Watching episodes on TV of Flip That House can be intoxicating when you see how much money can be made...be careful!

When all is said and done, the value of these upgrades, whatever they may be, must come from comparables in the same market, and must come from current market pricing, generally within the last six months. Comparable values are also derived from homes that have actually closed and sold, not those that have just been listed for sale.

Regards,

Eric Leigh, Senior Loan Officer

 
Posted by Eric Leigh at 5/8/2007 4:42:00 PM

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